Think twice before you default: Even guarantors aren’t safe! – Fuseini Sumani writes

Ghana’s central bank, the Bank of Ghana (BoG), has taken a bold step to confront one of the most pressing challenges in the banking sector—non-performing loans (NPLs). With Ghana’s NPL ratio ranking among the highest in Sub-Saharan Africa, the BoG’s newly revised regulatory measures are not just timely, they’re critical.Travel guide

These reforms aim to safeguard the profitability, liquidity, and solvency of the banking industry, while protecting the stability of the entire financial system. While the spotlight has largely been on regulated financial institutions (RFIs), the real story lies with borrowers (individuals and businesses) who seek credit from these institutions.

At the heart of these measures is a term that’s now making waves: “Wilful Defaulter.” It’s more than just a label; it’s a red flag that could shut the door to future credit and trigger serious reputational and financial consequences.

But here’s the twist: many people don’t know what qualifies someone as a Wilful defaulter. It’s not just about missing payments. It’s about intentional actions—like diverting loan funds, refusing to pay despite having the means, or even relocating without notice.

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And perhaps most surprising of all? Guarantors—yes, those who simply backed someone else’s loan—can also be classified as Wilful defaulters under certain conditions. If a guarantor has the capacity to pay but refuses or colludes in any way with the borrower’s misconduct, they too face the same prohibitions.

This write-up is your guide to understanding who a Wilful defaulter is, why it matters, and how to avoid falling into that category—knowingly or unknowingly.

According to the revised regulatory measures, a Wilful default would be deemed to have occurred if the following events are noted;

• Deliberate Non-Payment Despite Capacity: Borrowers who have the financial capacity to repay but intentionally choose not to.

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• Diversion of Funds: Borrowers who use loan proceeds for purposes other than agreed, such as investing in unrelated ventures or personal use.

• Siphoning of Funds: Borrowers who transfer loan funds to other accounts or entities to avoid repayment or conceal usage.

• Fraudulent Transactions: Borrowers who engage in fraudulent documentation or misrepresentation of collateral during the loan application and, by so doing, secure the loan through fraudulent means.

• Relocation/Disposal Without Notice: The borrower has defaulted on its repayment obligations to the RFI and has, without the RFI’s knowledge or consent, disposed of or removed the movable or immovable assets pledged as security for the facility.

• Relocation Without Notice: Borrowers who change their address or contact details without informing the lender making it difficult to trace or communicate with them.

• The borrower has defaulted on its repayment obligations to two (2) or more RFIs concurrently. However, the borrower may be exempted as a Wilful Defaulter if evidence is provided to the RFI that its inability to meet repayment obligations is due to loss of employment, force majeure, or disability.

• In the case where a guarantor of a Wilful Defaulter ;
• Refuses to comply with the demand by an RFI for payment, despite having sufficient means to make payment.
• Act in collusion with the borrower to divert funds or misrepresent the purpose of the loan.
• Provide fraudulent documentation or misleading information during the loan approval process.
• Deliberately obstruct recovery efforts or refuse to cooperate with the Regulated Financial Institution (RFI).
Then such a guarantor would also be treated as a Wilful Defaulter.
• Directors of companies that are Wilful Defaulters, where RFIs have identified siphoning/ diversion of funds, misrepresentation, falsification of accounts, and fraudulent transactions with the directors’ consent or connivance, shall also be deemed as Wilful DefaultersLoan guaranteesLoan recovery services

In our next issue, we spotlight one of the most far-reaching elements of the Bank of Ghana’s new regulatory measures—the consequences of willful default. With prohibitions that include being barred from accessing credit for up to five years or more. This is not just a policy update—it’s a wake-up call to borrowers and guarantors alike. Don’t miss it.

By Fuseini Sumani, Branch Sales and Service Manager, Fidelity Bank Limited